12k
spree marketplace facilitator sales tax avatax avalara

As a Marketplace Facilitator collect sales tax for marketplace sellers if required

New regulations already passed by the majority of states require online marketplace owners and operators to collect and remit sales taxes on behalf of their sellers. Below is a walkthrough of the new responsibilities in the form of frequently asked questions and answers (FAQ).

TL;DR: if all your marketplace sellers ship over a certain amount (usually between $100k – $250k in total) into any state then you should automate sales tax handling or could get in trouble with tax authorities.  Services such as AvaTax integrate well with Spree to help you mitigate your tax-related risks.

Why are these new regulations being passed? What happened? 

States are looking for new revenue sources and taxing E-Commerce businesses seems like a good idea. Death and taxes.

For many years the rule of thumb was: if the seller has a “sales tax nexus” in a state where the goods or services are shipped or sold to, so some form of physical presence (a warehouse, a factory, an office, a store), then sales tax is owed to that state. Otherwise, it isn’t and the transaction was sales tax-free.

That changed with the Supreme Court’s decision in South Dakota v. Wayfair in June 2018. That precedent triggered a landslide of new state legislation establishing a new “economic nexus” concept. If it can be proven that an E-Commerce seller or a marketplace has significant “economic and virtual contacts” affecting the state then it is required to collect and remit sales tax in that state. The new concept applies to marketplaces but also single-vendor stores.

Who is a marketplace facilitator and is required to handle taxes on behalf of marketplace sellers?

Payment processors or classified ads websites are NOT treated as marketplace facilitators.

What kind of marketplaces are affected by the new regulations? Are all marketplace startup companies affected?

Who is obligated and responsible for the correct collection of sales tax – marketplace operator or marketplace seller?

As a marketplace facilitator, should I expect a state tax audit from each state my sellers are selling to?

Yes.

As a Marketplace Facilitator, how can I correctly collect sales tax for sellers if required?

Is this all I need to know?

Most probably, no. By the time you are reading this article, it may be out of date or inaccurate. You shouldn’t treat it as legal advice. Make sure to perform a state-by-state analysis of your marketplace business sales tax requirements. Consult your legal and tax support.

Drop us a line to discuss automating your sales tax obligations and mitigate tax-related risks.

Let's use Spree to build exactly what your business needs

Let's use Spree to build exactly what your business needs

facebook